Jim Parrott's Deposition May Be Less Than Meets The Eye
The January 24, 2016 post that follows, which was initially presented as speculation about an unconfirmed fact, is, until further notice, irrelevant.
Dated January 24, 2016
Northeasterners began to hunker down on Friday, soon after the markets closed. But then GSE shareholders received a warm refreshing blast of schadenfreude.
(no connection to former Fannie CFO J. Timothy Howard) reported: "Sources close to Jim Parrot have disclosed that he was the final deponent in the Fairholme Lawsuit and he has taken the fifth on 100s of questions."
Up until 2013, James Parrott was a senior advisor at the National Economic Council in the White House. He advised on housing issues. Before that he was counsel to HUD Secretary Shaun Donovan. Though he may have liaised with FHFA and Treasury, he was not a decision-maker with regard to the Third Amendment sweep under dispute.
I know nothing beyond what was reported on the site. However, if a few days go by and Parrott says nothing, I think it's fair to draw an inference. It's one thing to say that you have been advised not to talk about your participation in an ongoing investigation. But this is a simple yes/no question about Parrott; either he took the Fifth or he didn't. It's hard to give a non-answer to that.
This one time I'll break my self-imposed rule to never speculate about things I don't absolutely know to be true. (How many times have we heard the prognostication, "If true, this could spell disaster for Hillary Clinton," which ends up in the dustbin of oblivion? ) However I intend to dampen expectations rather than inflame them. Parrott's decision to take the Fifth may be less than meets the eye. I doubt that he is in serious legal jeopardy.
Parrott expected the deposition to be kept secret: And I feel 98% certain about why Parrott chose not to testify. First, he probably didn't want to become involved in nasty and protracted litigation. Nobody does. Second, he felt highly confident that his deposition would never see the light of day. His deposition was secret, under seal. Though a court may draw an inference from Parrott's refusal to testify in a civil case; Parrott's role was not a critical element of the plaintiffs' case to overcome the government's motion to dismiss.
Moreover, counsel for the plaintiffs and the defendants are highly motivated to honor that secrecy, for reasons that extend beyond their legal duty to do so. For over a year, plaintiffs and the government have battled over which documents shall be disclosed as part of discovery, and which individuals may be deposed. Plaintiffs and their counsel are hypersensitive about giving any kind of impression to Judge Sweeney that any confidential information might be compromised. And of course the government doesn't want embarrassing info to leak out.
At this juncture, it looks like plaintiffs have a strong and compelling case to defeat the government's motion to dismiss without Parrott's testimony.
Taking the Fifth does not automatically indicate criminality: Of course, taking the Fifth looks bad. It's human nature to think a witness would speak up if he had nothing to hide. But it's not as simple as that. We rarely know what motivates a witness to take the Fifth. But you have to remember that almost anyone can be indicted by an overzealous prosecutor. And though such possibility may be quite remote, counsel might advise a prospective witness, out of an abundance of caution, not to say anything, especially in a secret proceeding.
For instance, under 18 U.S.C. Sec. 1001, it's a felony to knowingly and willfully falsify, conceal, or cover up a material fact to any federal official. So, if you forgot to mention something that, in retrospect, might be misconstrued as an effort to conceal, you could be in trouble. Of course, the prosecutor has the daunting burden of proving that you knowingly concealed something, but the very remote possibility of indictment may exist.
Moreover, a witness who invokes the Fifth cannot say anything that is relevant to the question he refused to answer, because such statement may be construed as a waiver. Which is why deposition witnesses sound like robots who continually say something like, "Under advice of counsel, I assert my 5th Amendment privilege against self incrimination," in response to dozens of questions.
My first blush impression is that the establishing any criminal case against Parrott would be an especially daunting challenge. Though Parrott has a J.D., he does not appear to be a practicing attorney. And it might be a sufficient defense to say that he believed everything was on the up and up.
That is, Parrott might be able to establish a plausible case of deniability, claiming was unaware of any improper actions. If a U.S. District Court Judge, Royce Lamberth, was deluded into thinking that Treasury and FHFA could do whatever they wanted, then one can argue that an economic advisor would come away with the same good faith belief.
Nonetheless, if a participant in the Third Amendment sweep took the Fifth, lawyers from the civil litigation side of the Justice Department would recognize the potential conflict. They would probably make a referral to a criminal unit of the DOJ. And then it could take the criminal unit a very long time to determine whether litigation is appropriate.
So why was the Parrott deposition leaked? Every leaker has an agenda, though that agenda may simply be the irresistible urge to gossip, to demonstrate that he's inside the loop. From what I can tell, most leaks to mainstream reporters never get published. Though this time, the leaker clearly wanted to shape the media narrative.
Was it an effort to boost the price of the stock? Possibly. At the time of this writing, the market has not opened following thepost. The GSE stock prices had collapsed in 2016, and remained in free fall up until Thursday January 21, 2016. You have to remember that it's much easier to manipulate the price of a stock that trades on the pink sheets.
Again, the major investors with which I have had limited contact are phobic against sharing any information not in the public domain, because they see a very bright light at the end of the tunnel. Their motivations are not political.
But there are a number of other large GSE investors and some must be hurting badly. Money is always a big motivator.
My guess is that the leaker was motivated out of resentment of Parrott. From what is easily inferred from redacted filings, some witnesses were compelled to admit under oath that the initial story about the Third Amendment Sweep was false. (How could it possibly be true?) Former colleagues, who were backed into a very uncomfortable corner, would resent Parrott's effort to walk away from all of it.
But the most important consequence of the leak is that it changes the media landscape. Parrott needs to answer, yes or no, whether he took the Fifth. If he lies, he will be smoked out. If he admits to taking the Fifth, Parrott's legal issues will probably be the least of his concerns. The Court of Public Opinion is prone to making snap judgements, which are harsh.
Once a senior White House official admits to taking the Fifth, a swarm of DC reporters, lusting for the next Watergate, starts aggressively asking questions to other Administration officials. If Parrott has said nothing so far, it must be because he's involved in damage control meetings with The White House.
Parrot's deposition, in the broader scheme of things, may be no more significant than a 3rd rate burglary.
[Corrected from earlier versions, which made incorrect statements about OTC stock trading and about Mr. Parrott's background.]
14 comments - Jim Parrott's Deposition May Be Less Than Meets The Eye
It broke my soul to see you sell out. The Dark Side takes another.
Why are you on the same payroll as Carney? It's not too late to confess and come out on the right side of this.
Why did you feel the urgency to ask this question and answer it in incoherent manner?
To ask this question you need to be one of those insiders who know everything.
Otherwise how do you know that this is a special leak with the ulterior motives?
This is also one of the major event in the discovery process and for whatever reasons it became public. Probably this “Jim Parrot refuses to answer any questions” news does not violate any laws. So calling it sneaky makes no sense. This news only opens up more questions and more discoveries regarding misconduct of public officials in plundering private shareholder companies.
Obviously any plaintiffs would like to make this event look like favorable event and want to build public and media support for their case. Attributing ulterior motives for this does not seem to be in the right spirit. This is how things work. Have we not seen defendants doing it many million times?
This event needs to be interpreted in the context of so many obvious violations by public officials, conflict of interest and trillion dollar private shareholder companies under the draconian conservatorship.
If Parrott had little involvement with 3rd Amendment, why would his former colleagues resent his walking away? He had little involvement so why be upset if he is not implicated? If the leaker was an angry former colleague, then it seems likely that Parrott was more involved in 3rd amendment (position of timhoward717) than you suggest.
Legally, FHFA was a decider, under contract,Treasury was a decider with regard to the 3rd Amendment. It's likely that FHFA, Treasury & the WH were all on the same page, and all colluded to wipe out the GSEs, but in terms of who has primary authority and responsibility, it was FHFA and Treasury. My gut tells me that everyone knew what was going on, but I prefer to write about facts that are in the public domain.
In my experience, highly placed people are careful about not leaving fingerprints, so I assume there won't be any emails saying we know this is wrong but we're doing it anyway. So Parrott, if threatened with indictment, could say he thought that everything was proper. It may even strain credulity, but it's not easy to disprove beyond a reasonable doubt.
Thanks for your response! In essence, Parrott and others were part of the collusion but there is no paper trail. So it really just becomes an issue of how best to pretend like you don't know anything. 1) Plead the 5th or 2) testify and risk accidentally perjuring yourself. Parrott chose #1.
Let me begin by saying I am sincerely grateful for your brilliant contributions in support of the Rule of Law which I have alluded to in many comments. But I have to second guess your decision in presenting possible rationale for Parrot's silence. The points you outlined are the very reasons pleading the 5th does not automatically signal a final verdict, which should already be realized by most. To highlight this is to fuel the fire of our detractors.
I suspect your article arises from a need to to be abundantly cautious and your laudable respect for open-minded and unbiased analysis. Yet I can't help but feel regret in reading it. When the enemy is in retreat, you don't throw them more ammunition out of a sense of fair play. I don't believe it would be unethical, in a debate, to keep to yourself facts that could strengthen the opponent's position. Especially when you are not 100% sure of the facts, which you seem to admit.
Nevertheless, I have faith that you will continue to champion truth and justice and thereby the interests of the rightful owners of the GSE's.
Agree with your post and support your work.
To those labeling Mr. Fiderer as a "sellout," shame on you. David has been devoting countless hours towards this cause without pay, and his advice deserves at least a passing reflection, not a knee-jerk dismissal.
Let me cite an analogy. Earlier in the last century, a group of anthropologists discovered a tooth, and they extrapolated an entire humanoid civilization from the tooth's morphology, its discovery location, local fauna, seasonal variations, etc. The tooth turned out to be from a pig.
Now, as much as shareholders would love to succumb to wishful thinking, inferring an entire fantasy from Parrott invoking the 5th is not unlike the "Nebraska Man" example above. It's tempting, but otherwise irrational to think too much of it. Not only is Parrott's invocation GOSSIP, but even if he did invoke it for 100s of questions, what exactly are you going to do with this information? Share it on Twitter? Spam media outlets? Go to TH717 and celebrate?
In other words, it doesn't really matter right now without further information.
It might mean something; it might not. Not enough data.
Furthermore, what David is trying to do is to distance the pro-GSE field (ie us) from the anti-GSE field by appearing relatively unbiased and levelheaded, unlike the shills on Fox and WSJ who cheer and troll at every downward price tick they see. Therefore, as a shareholder, do show some self-respect by pausing to think when a fellow supporter offers a differing perspective, rather than turning on him like piranhas.
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